Author Topic: Suggestions to reduce ETF portfolio  (Read 3056 times)

Grog

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Suggestions to reduce ETF portfolio
« on: March 26, 2014, 02:10:36 AM »
Hi everyone

I'm new atall this investing stuff and after reading a little bit of that in here and there I've decided, without really knowing what I was doing, to start investing in low-cost ETF. In February I've bought participation in 5 different ETFs, 20 % each, with an allocation of 40% bond and 60% stocks.
I'm 28 year old that manages to put in investing only 10'000 $ every year (the rest are mandatory and facultative pensions funds).

So I invested 2000$ in each one of the 5 indices, and I paid a total of 150$ of transaction fee for 5 transactions. What I didn't realize is that with my online broker up to 5000$ per transaction the fee remains approximately the same: 5x5000 $ transaction amount to 160$ fees! It's half of the expenses!!

But since I need 25000$ to invest every year in this 5 indices to maximize the fees efficiency, for the moment I can only do rebalancing only every 2-2.5 years, and I accumulate cash and leave him there without really growing.

What are the suggestions? Should I forget about 2-3 ETF and start concentrating only in 2 max 3, with rebalancing 1x annually with 10000$-15000$? Probably I can augment my exposure to stocks.

Or just forget about the fees and just put as much money as possible as fast as possible in the indices, even once x month?

What's the best strategy? I don't intend to change broker because fees here (Switzerland) are approx all the same: there is a fix cost of at least 15$-20$ per transaction.

By the way my allocation is:

Bonds:
20% iShares Euro Corporate Bond UCITS ETF
20% SPDR Barclays US Treasury Bond UCITS ETF
Stocks:
20% Vanguard FTSE Developed Europe UCITS ETF
20% Vanguard FTSE All-World UCITS ETF
20% Vanguard S&P 500 UCITS ETF


Really thanks for all suggestions! This is a great community.

pom

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Re: Suggestions to reduce ETF portfolio
« Reply #1 on: March 26, 2014, 02:46:56 AM »
HI,

Two thoughts.

1- you could put 60% into Vanguard FTSE All-World UCITS ETF . After all idt includes the US and Europe already.

2 - you could buy 5000 of two funds every year, rotating the funds that you buy into each year. You may be unbalanced for a few years but it is not too bad. What I do with one of my account where I have two funds (Europe and Rest of World) is that every month I invest into the fund that has the lowest overall value. That may not work well for you in the short run but it will eventually works fairly well.

Grog

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Re: Suggestions to reduce ETF portfolio
« Reply #2 on: March 26, 2014, 12:39:42 PM »
Hi pom
thanks for the reply!

mmmm your first suggestion hit me: I wanted to diverisfy, but since EU and US are probably the most represented country, it doesn't really makes sense as anti-risk allocation. Moreover, the all-world ETF has an yearly fee of 0.25%, while DEV EU ETF has an 0.15% and S&P500 has 0.9%. It probably makes sens to concentrate in both EU and S&P, since have lower fees, and get rid of the all-world.

I'll probably going to concentrate my resources on the US and EU DEV for the stocks part, and in the meantime increasing my balance to 70% stocks, 30% bonds. That should cover the first years while maximising my transaction taxes.


SDREMNGR

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Re: Suggestions to reduce ETF portfolio
« Reply #3 on: March 26, 2014, 01:18:29 PM »
Why all the fees?  Fidelity has a bunch of no trading fee etfs and I examine Vanguard does as well. 

Grog

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Re: Suggestions to reduce ETF portfolio
« Reply #4 on: March 26, 2014, 02:00:05 PM »
I couldn't find one with free transactions here in Switzerland, every one I've seen had some kind of fix amount per transaction + a variable % part. I didn't look thoroughly and that in detail because the online brokerage with this company eliminate de-facto all the expense of my private bank account and for the debit card (at least 36$ /y).

I'll continue to look and I hope someday there will be free online brokers like in the US.

AssetGrinder

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Re: Suggestions to reduce ETF portfolio
« Reply #5 on: June 11, 2014, 03:49:21 PM »
If you are investing new capital You just just limit your transactions. Wait till you reach a certain threshold of lets say 3000-5000 at a time. At that time put it all towards one fund at a time. 3 times a year into 3 different funds sound right for you to achieve your goals. best of luck